In our second episode of The Legal Series, we are discussing the importance of industry-specific software in the legal industry. Last week we talked about staff productivity and efficiency KPIs, which require a system to efficiently track and manage. While this can apply to other industries, we are going to focus on the main reasons why industry-specific software is important and the components necessary to run your firm well (without spending hours to get the information needed).
What we cover in this episode:
- 00:26 – Intro
- 01:43 – Katina’s legal background
- 02:29 – Why the legal industry needs industry-specific software
- 03:51 – Software components we recommend
- 09:28 – Systemize
- 10:12 – Crucial insights to grow your firm
Katina’s legal background
Gaining much of her accounting and advisory experience in service-based businesses, Katina Peters, CPA, CGMA, has worked with the legal community for over 20 years. She has worked closely with individual owners, as well as multiple partner firms, that provide corporate and personal law. Over the years, Katina has seen what works and what does not work in a law firm. She has helped firms establish good accounting structures and implement systems to compile the data that helps an owner manage, improve and grow their firm.
Why the legal industry needs industry-specific software
There are many regulations surrounding trust funds and tracking those accounts, which makes managing those accurately a top priority. Industry-specific software can make the manual process of doing so much easier and decrease chances for errors. Another key function of industry-specific software is having the ability to generate reports at the push of a button. You want to make sure that the system has built-in management reports that are specific to law firm KPIs (Key Performance Indicators). Again, tracking this data manually is time-consuming and opens you up to more errors. Using software that is tailored to manage these processes will allow you to obtain the data quickly, easily, and at regular intervals without much effort.
Software components we recommend
Trust fund tracking
Accurately tracking client trust funds is one of the main reasons industry-specific software is critical. As a firm collects a retainer from a client for case expenses and fees, the firm needs a way to track how these funds are used. Most states require that law firms hold those monies in a separate client trust fund account so it cannot be co-mingled with operational funds. This is tricky to do with run of the mill accounting software, like Quickbooks, as these systems are not designed to handle the multi-client, multi-entry transactions and reconciliation of trust fund accounting. This issue is crucial because a law firm practitioner can lose their license if regulations are not followed properly.
Time and billing
Time tracking and billing capabilities are important to look for in the accounting software you choose for your law firm. Most firms bill by the hour. Some have different arrangements, but ultimately they all need to do billing. Your software also should generate time and billing reports so you can verify that you are adequately tracking your time and billing your clients correctly through the month and the year.
Other management reports
Another helpful component of your firm’s software is the ability to generate management reports. When analyzing your business, you will want to be reviewing team utilization reports, client productivity reports, team and partner compensation structures. Having this information available will help you manage and make decisions for your business.
Additional functionality or integrations for consideration
The above-listed features should be built into your accounting software. There are a number of other components you will need to incorporate into your accounting structure, either in a different system or congruent software. Case and document management software is valuable in an office setting. This will offer the ability to compile, organize, and access all case documents in one central place, and route case work to various people who need to work on it. This can also be tied into calendaring for meetings and court dates. Additionally, we discussed time and billing, but you may also want to consider an online payment component. Providing a quick and convenient way for your clients to pay their fees will help to increase your cash flow.
As the saying goes, junk in, junk out. If you don’t use your software properly, or you don’t input the correct information, you won’t get useful information on the other side. So, you need to have systems and procedures in place for doing it the right way, for reconciling the data, and making sure that errors aren’t introduced. Establishing exceptional accounting policies and procedures will allow you to utilize the information coming out of your system to effectively manage the future of your firm.
Crucial insights to grow your firm
Ultimately, if your goal is to grow your firm and increase profitability, the insights you gain from industry-specific software can help you reach those goals much more efficiently. The key to growing any company is to have access to accurate, timely and effective management information. Knowledge is power and as a leader of your practice, you need these tools to make solid management decisions and understand what needs to happen to push the business forward. Using a system designed for a law firm helps to track pertinent data, pull reports regarding team performance, and find bottlenecks and inefficiencies that are stunting the growth and profitability of the business. Keep in mind, we want to leverage your time involvement as well. You can generate much of this information manually, but pulling it right out of the system at the push of a button is a big deal and can eliminate hours of work.
Using industry-specific software is a crucial step toward gaining insight into your business and moving toward growth goals. The software should help you obtain important data quickly, easily, and at regular intervals for analysis. We want to highlight trust fund accounting, as it is a highly regulated area of law practice in most states. So, it’s important to implement a software that can track and reconcile those accounts accurately. A firm that does not have sturdy accounting procedures in place for client trust fund accounting puts their license at risk.
Other components you will want to consider when choosing the right software are its ability to track time and billing, provide team utilization and client productivity reports, and support compensation structures. Additionally, you want to consider some additional features built into your software, or use a congruent software. These features include case management, document management, calendaring, and online payment capabilities.
Implementing software is one thing, but using it properly is key to getting accurate and timely information. Developing good policies and procedures will optimize information output and firm efficiency. Ultimately, that will be what sets you apart from other firms and provide you the knowledge to set goals and achieve them.
As we’ve mentioned in our strategic planning series, any truly successful business is not getting there by chance. Success is accomplished by making a plan, pulling together the necessary information, analyzing the metrics, and making required changes toward growth on a consistent basis. Having the best tools and information at your disposal is a continual process that drives growth and profitability.
Links mentioned in this episode: